Enthusiasm for Eli Lilly, the club's holding company, needs to be tempered, at least for now, as Wall Street grapples with the possibility of a major shakeup of health policy in Washington. Republican President-elect Donald Trump on Thursday nominated prominent vaccine skeptic and anti-obesity drug critic Robert F. Kennedy Jr. to lead the Department of Health and Human Services. HHS, for short, is the sprawling agency that sits atop the Food and Drug Administration, the Centers for Disease Control and Prevention, and the Centers for Medicare and Medicaid Services, among other divisions. The Cabinet-level HHS secretary position requires confirmation by the Senate, where Republicans will have a majority of 53 seats, while the Democratic caucus will have 47. Some members of the GOP, such as Kentucky Sen. Rand Paul, congratulated Kennedy for his nomination. But at this point, it is unclear whether Kennedy will be able to meet the 50-vote threshold for confirmation. Shares of obesity drug maker Eli Lilly fell more than 4% on Friday, extending a decline of about 3% in Thursday's session. Media reports of Kennedy's nomination emerged late Thursday afternoon, with Trump confirming the decision in a social media post after the closing bell. Eli Lilly's main competitor in the obesity market, Danish firm Novo Nordisk, also saw its shares fall more than 4% on Friday. Shares of Covid-19 vaccine makers, including Moderna and Pfizer, sold off Thursday night and again in Friday's session. A popular exchange-traded fund that tracks biotech stocks is headed for its worst week since March 2023. Meanwhile, analysts at Deutsche Bank downgraded British vaccine maker GSK over Kennedy's selection. Big Picture During his campaign, Trump had promised to let Kennedy “go crazy” on health care issues if given the chance to return to the White House, but selecting him to lead HHS was widely seen on Wall Street as a unlikely outcome. . It now shrouds the pharmaceutical industry in uncertainty until there is more clarity about its support in the Senate. Kennedy, 70, son of the late U.S. senator and presidential candidate Robert F. Kennedy and nephew of the late President John F. Kennedy, began his career as an environmental lawyer. In recent decades, he gained traction for his controversial views on health issues, especially vaccines. Kennedy has pushed unfounded claims that childhood vaccines are linked to autism, despite numerous studies debunking such claims. “Vaccines do not cause autism,” the CDC website reads. More recently, Kennedy has taken aim at what he describes as a chronic disease crisis in the United States, particularly diabetes and obesity among children. It was the focus of his failed 2024 presidential campaign, initially in the Democratic primary and then as an independent candidate. Kennedy endorsed Trump in August. LLY YTD mountain Eli Lilly stock performance so far this year. Kennedy has criticized the pharmaceutical industry on several issues. In an op-ed published in The Wall Street Journal in September, Kennedy wrote that the United States should consider preventing companies from advertising directly to the public and argued that lawmakers in Washington “should cap drug prices so that companies do not can charge Americans substantially more than Europeans. pay.” Kennedy specifically mentioned Ozempic, Novo Nordisk's diabetes treatment, when defending limits on drug prices. Ozempic is the example of the fast-growing GLP-1 class, in which Novo Nordisk and Eli Lilly are currently the two dominant players. Some on Wall Street expect the GLP-1 drug market to be worth $100 billion by 2030. GLP-1 drugs mimic a gut hormone to help regulate blood sugar and suppress blood sugar. appetite, leading to weight loss. Eli Lilly's GLP-1, called tirzepatide, sold as Mounjaro for diabetes and Zepbound for obesity, is at the center of our investment thesis in the company. has said it could become the best-selling drug of all time, thanks in large part to its adoption for weight loss. Kennedy maintains that the way to combat high rates of obesity in the United States is through changes in diet and medications. food systems. Weight-loss drugs, Kennedy has argued on social media, don't get to the “root” of the obesity problem and instead simply “brighten the wallets of distant Big Pharma executives.” Eli Lilly CEO David Ricks and other GLP-1 advocates argue that obesity is a disease and should be treated as such by both doctors and health insurers. In that way, they argue, GLP-1 should be seen as a valuable tool, along with diet and exercise, in the treatment of obesity. Lilly and Novo Nordisk have also attempted to show that GLP-1 improves patients' health outcomes beyond simply losing weight. Earlier this year, the FDA said that Wegovy, Novo Nordisk's anti-obesity drug, can also be prescribed to reduce the risk of serious heart problems, such as heart attacks and strokes, in overweight patients with cardiovascular disease. Eli Lilly has demonstrated similar heart health benefits with tirzepatide. It has also shown promise in the treatment of sleep apnea, among others. Simply put, Eli Lilly has been our favorite pharmaceutical stock for years thanks to its stellar portfolio led by GLP-1. And the share price performance since we took a stake in October 2021 (more than tripled even with the recent declines) speaks for itself. The S&P 500 has risen just over 30% in the same stretch. But at this point, Kennedy's nomination requires us to be more cautious with Eli Lilly in the short term. Stocks could remain weak as the market digests the implications and probabilities of Kennedy leading HHS. From the perspective of a drug stock investor, Jim said it's hard to imagine a more concerning choice for HHS secretary than Kennedy. “We haven't touched Eli Lilly yet. We don't have to,” Jim said during Friday's morning meeting. He noted that our earnings pickup in early September, at nearly $961 per share, allows us to be patient and cautious as the Kennedy nomination process plays out. Eli Lilly's most recent quarterly results were noisy in some areas, but underlying prescription growth for its key GLP-1 drugs was encouraging. (Jim Cramer's Charitable Trust is long LLY. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable fund's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Eli Lilly and Company, headquarters of the pharmaceutical company in Alcobendas, Madrid, Spain.
Cristina Arias | Cover | fake images
Enthusiasm for the Club celebration Eli Lilly The situation must moderate, at least for now, as Wall Street faces the possibility of a major restructuring of health policy in Washington.
